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CIRCULAR No

CIRCULAR No. 20/2002/TT-BTC OF FEBRUARY 28, 2002 GUIDING THE IMPLEMENTATION OF THE GOVERNMENT�S DECREE No. 71/2001/ND-CP OF OCTOBER 5, 2001 ON PREFERENCES FOR INVESTMENT IN THE CONSTRUCTION OF DWELLING HOUSES FOR SALE OR LEASE

Pursuant to the Government�s Decree No. 71/2001/ND-CP of October 5, 2001 on preferences for investment in the construction of dwelling houses for sale or lease;

Pursuant to the Government�s Decree No. 178/CP of October 28, 1994 defining the tasks, powers and organizational apparatus of the Ministry of Finance;

The Ministry of Finance hereby guides the realization of preferences regarding land use levy, land rent, land use tax (land tax) and enterprise income tax for preferential investment projects on construction of dwelling houses for sale or lease, as follows:

A. SUBJECTS OF APPLICATION

I. Enterprises of all economic sectors, which are investors of investment projects on construction of dwelling houses for sale or lease as prescribed in Article 2 of the Government�s Decree No. 71/2001/ND-CP, and entitled to the preferences, include:

1. Domestic enterprises:

- State enterprises founded and operating under the State Enterprises Law;

- Enterprises founded and operating under the Enterprise Law;

- Enterprises of political organizations, socio-political organizations and professional associations; security and defense enterprises founded and operating according to law provisions;

- Cooperatives founded and operating under the Cooperative Law;

- Enterprises directly invested by overseas Vietnamese; enterprises directly invested by foreigners permanently residing in Vietnam; enterprises jointly founded by Vietnamese citizens and overseas Vietnamese and/or foreigners permanently residing in Vietnam.

2. Foreign-invested enterprises founded and opera-ting under the Law on Foreign Investment in Vietnam.

II. In order to enjoy the preferences regarding taxes and other remittances prescribed in the Government�s Decree No. 71/2001/ND-CP, the preference-eligible subjects mentioned at Point I, Part A of this Circular must meet the following conditions:

- Having made housing business registration according to law provisions;

- Investing in projects on multi-storied dwelling houses (with five stories or more for Hanoi and Ho Chi Minh cities, three stories or more for other provinces and cities); with self-contained apartments, common stairs and passages; housing projects with at least 60% of their total land acreage being used for the construction of multi-storied condominiums for priority sale or lease to subjects specified in Article 5 of the Government�s Decree No. 71/2001/ND-CP. The house sale prices or rents have been determined on the principle of capital preservation and benefit assurance for the concerned business establishments. For sale prices or rents of condominium apartments, the land use levy, land tax and land rent preferences must not be calculated into the prices or rents (as prescribed in Clause 1, Article 6 of Decree No. 71/2001/ND-CP).

- Fully and strictly complying with the law provisions on accounting, invoices and vouchers; being capable of accounting separately the business results of projects enjoying preferences regarding land-related tax and remittances.

B. LEVELS OF PREFERENCES REGARDING LAND-RELATED TAX AND REMITTANCES

I. For domestic enterprises: Domestic enterprises mentioned at Point I.1, Part A of this Circular, which execute housing projects prescribed in Article 2 of the Government�s Decree No. 71/2001/ND-CP, called project investors for short, shall enjoy the following tax preferences:

1. Land use levy preferences:

a/ Exemption from the land use levy for the land acreage used for the construction of condominiums;

b/ 50% reduction of the land use levy for the land acreage used for the construction of dwelling houses other than condominiums within the project area (if any);

c/ Exemption from the land use levy for projects on construction of dwelling houses of different types in geographical areas with difficult or extremely difficult socio-economic conditions (on list B or C in the appendices attached to the Government�s Decree No. 51/1999/ND-CP of July 8, 1999);

d/ Entitlement to deferred payment of the land use levy for the land acreage subject to land use levy payment, corresponding to the construction tempo of each project as decided by the provincial/municipal People�s Committees, but the duration for deferred payment of land use levy must not exceed five years, counted from the time of land assignment.

e/ For project investors that are assigned land and must pay land use levy as well as land-loss compensation as prescribed in Clause 2, Article 8 of the Government�s Decree No. 71/2001/ND-CP of October 5, 2001, the paid land-loss compensation amount shall be subtracted from the payable land use levy but must not exceed the total land use levy payable by the investors.

The investors shall not be allowed to calculate the relocation support expenses prescribed in Clause 1, Article 8 of the Government�s Decree No. 71/2001/ND-CP of October 5, 2001 into the land-loss compensation amount for deduction from payable land use levy or other State budget remittances (if any).

2. Preferences regarding residential land or project construction land use tax: The project investors shall be exempt from residential land or project construction land use tax for three years as from the time they are assigned land, for the land acreage used for the construction of condominiums. Where the condominiums are completely constructed then sold or handed over to users within less than three years, the time for land use tax exemption shall end upon the handing over of the condominiums.

3. Enterprise income tax rate preferences:

a/ The tax rate of 15% for investment in the construction of condominiums and dwelling houses of other types in geographical areas with extremely difficult socio-economic conditions (on list C of the appendix attached to the Government�s Decree No. 51/1999/ND-CP of July 8, 1999).

b/ The tax rate of 20% for investment in the construction of condominiums and dwelling houses of other types in geographical areas with difficult socio-economic conditions (on list B of the appendix attached to the Government�s Decree No. 51/1999/ND-CP of July 8, 1999).

c/ The tax rate of 25% for investment in the construction of condominiums and dwelling houses of other types in other geographical areas.

The investors must organize the separate accounting of the business results of each project enjoying the preferential enterprise income tax rates; if they fail to do so, the highest enterprise income tax rate applicable to the investors� production and business activities shall apply.

II. For foreign-invested enterprises:

Foreign-invested enterprises founded and operating under the Law on Foreign Investment in Vietnam (hereinafter collectively called investors), which join in constructing housing projects prescribed in Article 2 of the Government�s Decree No. 71/2001/ND-CP in urban areas, shall enjoy the following preferences regarding land-related tax and remittances according to Decree No. 71/2001/ND-CP:

1. Land rent preferences:

a/ Exemption from land rent for the land acreage used for the construction of condominiums throughout the land-leasing duration.

Where condominiums are built for sale, the land rent exemption duration shall be counted from the date the land-lease contract is signed till the date all condominium apartments are sold.

b/ Exemption from land rent for the first three years, counted from the time the land-lease contract is signed, for the land acreage for which the investors must pay land rent for the construction of dwelling houses (excluding the land acreage used for the construction of condominiums); past the land rent exemption duration, the investors must declare and pay land rent according to regulations.

Where the dwelling houses are completely built then sold or handed over to users within less than three years, the land rent exemption duration shall end on the date of handing over of such houses and land.

c/ Where a project must temporarily cease its construction or operation, with the approval of a State body competent to lease land, the land rent for the temporary construction cessation duration shall be reduced by 50%.

Within ten days after receiving the written approval of competent bodies on the temporary cessation of construction or operation, the investor must send its copy (affixed with the unit�s seal) to the land rent collection-managing agency for calculation of the reduced land rent.

d/ Where the investors sell dwelling houses other than condominiums, which are built within the land area assigned for the project on construction of condominiums, they must pay the use levy for the land (associated with the sold dwelling houses), but shall be allowed to deduct therefrom the land rent actually paid into the State budget for this land area, which, however, must not exceed the payable land use levy. The land-loss compensation amount shall not be allowed to be deducted from the payable land use levy.

- The land acreage for which the land use levy must be paid and the land rent is deducted is the acreage of land associated with the sold dwelling houses.

- The prices for calculation of the payable land use levy are the land prices set by the People�s Committees of the provinces or centrally-run cities on the basis of the land price bracket stipulated by the Government and computed according to the land prices at the time of transfer of dwelling houses.

2. Enterprise income tax preferences: The investors that execute projects on construction of dwelling houses prescribed in Article 2 of the Government�s Decree No. 71/2001/ND-CP of October 5, 2001 in urban areas shall enjoy the following preferential enterprise income tax rates:

a/ The tax rate of 10% for investment in the construction of condominiums and dwelling houses of other types in geographical areas with extremely difficult socio-economic conditions (prescribed in Section A of the list of geographical areas where investment is encouraged, in appendix I attached to the Government�s Decree No. 24/2000/ND-CP of July 31, 2000).

b/ The tax rate of 15% for investment in the construction of condominiums and dwelling houses of other types in geographical areas with difficult socio-economic conditions (prescribed in Section B of the list of geographical areas where investment is encouraged in appendix I attached to the Government�s Decree No. 24/2000/ND-CP of July 31, 2000).

c/ The tax rate of 20% for investment in the construction of condominiums and dwelling houses of other types in other geographical areas.

The investors must organize the separate accounting of the business results of projects enjoying different preferential enterprise income tax rates; if they fail to do so, the highest enterprise income tax rate applicable to the investors� production and business activities shall apply.

C. ORGANIZATION OF IMPLEMENTATION

I. FOR INVESTORS

Each investor must send one copy of the decision permitting it to act as investor, or the project investment license, the land-assignment decision, land-lease contract� (affixed with the unit�s seal) to the Tax Department of the province or centrally-run city where the unit�s head office is based, and another copy to the Tax Department in charge of land and housing tax collection in the locality where the project is to be executed within 10 days after receiving such decision so as to make registration for enjoying tax preferences.

1. On the land use levy declaration and payment, exemption and reduction, and deferred payment

- Within 15 days after being assigned the land, the investors must declare and pay the land use levy, compile land use levy exemption or reduction dossiers and send them to the direct tax management agencies under the guidance in Circular No. 115/2000/TT-BTC of December 11, 2000 of the Ministry of Finance, requesting land use levy exemption or reduction.

- Within 10 days after the provincial/municipal People�s Committees issue the decisions permitting them to defer land use levy payment, the investors eligible for deferred land use levy payment must send to the tax offices which directly manage the land use levy collection the copies of such decisions (affixed with the unit�s seal) for registration of the land use levy payment plan. The duration for deferred land use levy payment must not exceed five years as from the time of land assignment.

2. The land tax and land rent declaration, payment and exemption shall comply with current regulations.

3. On the application of enterprise income tax rates: Annually, the investors shall calculate, declare and pay enterprise income tax at the preferential tax rates.

4. For investors that are executing projects already approved by competent bodies before the effective date of the Government�s Decree No. 71/2001/ND-CP and meet all the conditions prescribed in Article 2 of Decree No. 71/2001/ND-CP and Section II, Part A of this Circular, they shall directly work with the local Tax Departments so as to determine the ongoing constructions and construction items, which are entitled to investment preferences under Decree No. 71/2001/ND-CP and the guidance in this Circular as from the effective date of Decree No. 71/2001/ND-CP.

5. Upon the expiry of the investment duration prescribed in their investment licenses, if the foreign investors are not allowed to extend their investment licenses as prescribed, they shall have to transfer without indemnification the entire infrastructures belonging to their projects to the competent Vietnamese State bodies according to law provisions and settle the existing matters according to Vietnamese law provisions. The succeeding investors shall enjoy investment preferences for the remaining project components, which have not been yet granted investment preferences, in the remaining preferential duration.

6. For the projects eligible for housing investment preferences as prescribed in the Government�s Decree No. 71/2001/ND-CP, if during the time of construction investment the competent bodies permit the change of their investors, the new investors shall continue to enjoy the investment preferences for the remaining project components, which have not yet been granted investment preferences, in the remaining preferential duration.

II. FOR TAX OFFICES

The tax offices directly managing the tax collection must make the lists of investors that have registered for executing investment projects on construction of dwelling houses, compile dossiers for monitoring each investor, grasp the situation of the project implementation; organize the tax collection and the implementation of tax preferences.

1. Land use levy collection, exemption and reduction:

- The collection of land use levy from the project investors shall be the same as that of land use levy from those subjects that are assigned land by the State under the guidance of Circular No. 115/2000/TT-BTC of the Ministry of Finance. The land use levy exemption and reduction shall comply with current regulations.

The land use levy exemption and reduction, the calculation of payable land use levies, and the determination of the duration of deferred payment shall be effected at the time of handing over the land for project execution or at the time of house sale, for foreign investors.

- Those investors who commit administrative violations of the regulations on the declaration and payment of land-related tax and remittances shall be sanctioned according to regulations.

2. The land tax exemption for investors of projects on construction of dwelling houses shall comply with the provisions at Point 3.a, Section IV of Circular No. 83-TC/TCT of October 7, 1994 of the Ministry of Finance, which guides the implementation of the Government�s Decree No. 94/CP of August 25, 1994 detailing the implementation of the Ordinance on Housing and Land Tax.

3. Land rent collection, exemption and reduction: The land use levy collection and payment and the land rent exemption and reduction shall comply with Decision No. 189/2000/QD-BTC of November 24, 2000 of the Minister of Finance, issuing the Regulation on land, water surface and sea surface rents applicable to various forms of foreign investment in Vietnam.

4. Application of enterprise income tax rates: The tax offices shall base themselves on the approved projects� dossiers of registration for investment preferences to determine the temporarily-paid tax amounts in each year. At the year-end, after receiving the tax settlement reports from the investors, they shall inspect the implementation of the housing investment projects so as to apply the preferential enterprise income tax rates, calculate the payable enterprise income tax amounts and make the tax final settlement according to regulations.

D. IMPLEMENTATION EFFECT

This Circular takes implementation effect 15 days after its signing, For the ongoing investment projects on construction of dwelling houses for lease, which meet all the conditions prescribed in Article 2 of the Government�s Decree No. 71/2001/ND-CP of October 5, 2001, they shall enjoy the new preferences regarding land tax and use levy prescribed in Decree No. 71/2001/ND-CP and this Circular if the preferences they are enjoying according to other regulations are lower than the preferences in the Government�s Decree No. 71/2001/ND-CP of October 5, 2001 for the projects or projects components which have been executed as from the effective date of Decree No. 71/2001/ND-CP.

The People�s Committees of the provinces and centrally-run cities shall have to direct the provincial/municipal Planning and Investment Services, Tax Departments, Finance and Pricing Services and Land Administration Services, the People�s Committees at various levels as well as the investors, within the scope of their respective functions and powers, to manage and execute investment projects and effect tax-related investment preferences under the guidance of this Circular.

If any problems arise in the course of implementation, the units are requested to promptly report them to the Ministry of Finance for timely implementation guidance.

For the Minister of Finance

Vice Minister
VU VAN NINH